Cannabis producer Cresco Labs Inc said on Wednesday it would buy rival Columbia Care Inc in a $2 billion all-stock deal, creating the largest US pot company by sales.
The buyout, one of the biggest in the industry’s history, would make Cresco the dominant player in a market projected to reach $46 billion in sales by 2026 thanks to pot legalization in states such as New York and New Jersey.
Columbia Care investors will receive 0.5579 shares of Cresco Labs for each unit held. Based on Cresco’s Tuesday close, this represents a price of C$4.57 for each share of Columbia Care, or nearly a 16% premium.
The deal, which was reported by Reuters on Tuesday, values Columbia Care’s equity at C$1.36 billion ($1.07 billion).
People familiar with the matter have said the buyout would require significant divestitures as the companies’ footprints overlap in multiple states, including New York where only 10 firms have cannabis licenses.
The companies did not address the issue in their statements.
They are both listed in Canada and trade over-the-counter in the United States as marijuana remains illegal at the federal level, and the two large US stock exchanges cannot allow companies that grow or sell the plant to list their shares.
Cresco said it expects to have annual revenues in excess of $100 million in eight different states by 2023 on a pro-forma basis.
It reported fourth-quarter revenue of $218 million on Wednesday, missing analysts’ average estimate of $234.7 million, according to Refinitiv data.
($1 = 1.2583 Canadian dollars) (Reporting by Arunima Kumar in Bengaluru, additional reporting by Shariq Khan; Editing by Aditya Soni)